GENEVA, Switzerland, (ILO News) – The International Labour Organization (ILO) launched its working paper, Combating inequalities: what role for universal social protection?, on Thursday, during an event that featured distinguished speakers from the ILO, the World Health Organization (WHO) and United Nations Research Institute for Social Development (UNRISD).
The paper, which was published at the end of 2024, underscores that inequalities remain a global challenge, and that income inequality in particular has reached alarming levels, with households in the lower 50th percentile holding 25 percent of total income, compared to 30 percent of total income held by those earning within the 90th percentile. Speakers at the event explored ways in which universal social protection and its financing can help reverse these trends.
The panel was moderated by Shahra Razavi, Director of the Universal Social Protection Department at the ILO, who also delivered the opening remarks. The panellists included Sudhvir Singh, Unit Head – Equity and Health, WHO; Katja Hujo, head of Bonn office and Senior Research Coordinator, UNRISD; Helmut Schwarzer, Head of the ILO’s Public Finance, Actuarial Services and Statistics (PFACTS) Unit, and Umberto Cattaneo, Public Finance Specialist (PFACTS), in ILO’s Universal Social Protection Department.
Katja Hujo underscored the structural causes of today’s inequalities, rooted in histories of colonialism, exploitation and extractivism. At the same time, these inequalities are both driving today’s multiple crises and being exacerbated as a result of the crises.
“Inequality negatively impacts economies and societies by hindering growth, preventing poverty reduction, curbing productivity growth, as well as domestic demand. Social policies, including social protection, are essential to mitigate inequalities, including those based on factors such as gender, race, ethnicity, disability, and citizenship among others. Discussions in the 4th International Conference on Financing for Development and in the Second World Summit for Social Development recognize the need for reducing inequalities through universal social protection and progressive domestic resource mobilization strategies,” explained Hujo.
Sudhvir Singh highlighted the importance of investments in social protection to promote health equity.
“Economic inequality is associated with worse health outcomes such as reduced life expectancy, higher infant mortality, higher rates of metabolic diseases and worse mental health conditions. A fundamental step to ensure health equity is to invest in universal social protection, as well as in universal public services, such as early childhood programs and universal education,” said Sudhvir Singh.
Income security, he further underlined, is the single largest contributing factor to self-reported health.
Helmut Schwarzer highlighted that higher social protection expenditure is associated with lower income inequality.
“The largest reductions in income inequality are observed for contributory pensions, which make up the largest share of social protection expenditure in many countries.” On average, countries that spend a larger percentage of GDP on a given social protection benefit are also those that obtain a larger reduction in income inequality for paying such benefit,” explained the ILO’s Schwarzer.
The online seminar also provided an opportunity to look at the impact that the sources of finance of social protection benefits have on the reduction of income inequality. In 23 out of 25 countries where data is available, personal income taxes also lead to a reduction in overall income inequality. However, such reductions are much lower than those observed for social protection benefits. In 14 out of 25 countries, income inequality is reduced by less than 5 per cent after income taxes are taken into consideration.
“Social insurance contributions play a key role in financing social security. These contributions enable the payment of contributory social protection benefits, which substantially reduce income inequality. However, single-rate social security contributions can be regressive and increase income inequality. Wealth taxes, however, which are not widely used, have the potential to substantially reduce income inequality,” explained Cattaneo.
The speakers emphasized the role of social protection as a key, but not the only, policy lever to reduce inequalities.
“Reducing income inequalities cannot be left to social protection systems alone. It requires a wide range of integrated public policies—from access to quality education and skills training, to labour protection, wage policies and formalization strategies, macroeconomic policies that create employment and livelihoods, and investment in quality public services—to reduce the primary distribution of income and make the labour market more equitable, explained Razavi.
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